Abstract:In international trade, L/C plays an important and indispensable role. As one of the most common methods of international settlement, L/C does have many advantages, such as efficiency, convenience, credibility and etc.. However, L/C also has its own flaws. The independent abstract rule is the cornerstone of letter of credit, but it protects fraud beneficiary in objectivity. Many illegal traders defraud others by using these flaws. Cases of L/C Fraud happened with increasing frequency. So many countries establish the exception rule of fraud on L/C to remedy it. However, the abuse of the exception rule would shock the benefit of third party acting in good faith in L/C business, which is the reason why the exemption of fraud exception rule on L/C come into being.

This dissertation makes research for some points of the exemption of L/C fraud exception rule. It also makes research in some case law, statutory law or judicial actions in some other countries, and puts forward some advice and some precautions to aviod the exemption.

However, our country’s legislation in this aspect is imperfect, so it’s a crucial task for us to strengthen the research on the exemption of fraud exception rule to protect the importer.

Key words: L/C; exemption of L/C fraud exception principles; precautions

Table of Contents

Abstract

中文摘要

1. Introduction-1

2. Literature Review-2

3. The Exemption of L/C Fraud Exception Principles-3

3.1 Limitations of L/C-3

3.2 L/C fraud exception principles-3

3.3 The exemption-4

3.3.1 UCC5 in USA-4

3.3.2 The regulations and legislations in China-4

4. Impacts of the Exemption on the Importer-6

4.1 To bear the economic losses-6

4.2 To bear all risks under the obligation-6

5. Precautions to the Risks-8

5.1 Carefulness in signing the contract-8

5.2 The beforehand prevention-8

5.3 Support from China’s laws and regulations-9

6. Conclusion-11

References-12

Acknowledgements-13